FMX - Investor Day 2026 - BGC GROUP INC

Explicit Guidance:

• Revenue Growth: FMX revenue is projected to exceed $300 million over the next three years, driven by a 36% CAGR observed over the prior three years (growing from $48M to $122M by 2026).
• Operating Margins: Management targets an incremental operating margin of at least 50% over the next three years.
• Technology Costs: Run-rate technology expenses are expected to remain stable at approximately $33 million, showing significant operating leverage as revenue scales.
• Front-Office Compensation: Compensation expenses are forecast to trend down from ~40% of revenue to levels seen in previous electronic platforms (approx. 25% of revenue).
• Market Data Revenue: FMX currently captures 6% of revenue from market data (vs. CME's 13%); management expects this share to grow by 3–4 percentage points in the coming year.
• Fee Increases: Fixed fees for "all-you-can-eat" deals are scheduled to increase in 2027.
• Fee per Million: Fee-per-million pricing in cash treasuries is expected to double as participant base expands.

Business-Segment Outlook:

• Futures Exchange (US Rates):
  • SOFR: Exponential growth expected in Year 3 (starting October 2025) once cross-margining technology is fully operational with FCMs.
  • Treasury Futures: Full curve launches scheduled for August 2026; Year 3 growth momentum expected to begin in May 2026.
  • Volume: SOFR futures hit a daily record of 162,000 contracts in October; management expects a "material amount" of connectivity upgrades to be completed within the next three months.
  • Client Onboarding: Expect to add 15–20 new buy-side clients by mid-2026; current pipeline includes 15–20 institutional accounts ready for trading pending volume checks.
  • Technology: API and algorithmic execution adoption is expected to accelerate volume, with clients using smart order routers trading 10x more than manual traders.
• Cash Treasuries:
  • Market Share: Currently at 42% of the cloud market (all-time high), growing 35% year-over-year ($84B/day).
  • Off-the-Run: Management anticipates significant growth in the "off-the-run" treasury market as client adoption of the electronic platform matures.
• Foreign Exchange (FX):
  • Volume: Platform volume has tripled to $19 billion/day since equity investment two years ago; growth expected to continue dramatically over the next 18 months.
• New Products:
  • Term Repo: Electronification of term repo expected to launch, leveraging existing BGC infrastructure; expansion beyond overnight repo.
  • Basis Trading: Platform development to include a "basis order book" linking cash and futures, launching with fixed ratios and evolving to dynamic pricing.
  • Swaps: Potential expansion into electronic inter-dealer swaps and listed swaps to unlock further margin efficiencies.

Market and Competitive Outlook:

• Pricing & Tick Sizes: FMX utilizes the tightest tick sizes in the market; competitors have already begun matching these tick sizes.
• Competitive Positioning: FMX claims 82% of the time (in Q3 2025) that SOFR bid-offer pricing is equal to or better than CME; 68% for US Treasury futures.
• Market Share Trajectory: Management expects futures volumes to follow the "S-curve" growth pattern seen in cash treasuries: slow adoption followed by exponential growth once critical mass (connectivity and margin benefits) is achieved.
• Resiliency & Monopoly: Management frames the market as moving from a monopoly (CME) to a duopoly, citing the need for competition to prevent complacency and innovation stagnation.
• Base Metals: Identified as a "gap in the market" for US-based price discovery; management expects increased regulatory and competitive activity in US-listed base metal futures (copper, aluminum) to replace London Metal Exchange dominance.

Macro / Industry Outlook:

• Economic Volatility: Anticipates continued "unprecedented political volatility" driving market volatility and trading volumes; views the current political environment as unlikely to change in the near term.
• Regulatory Landscape (CFTC/SEC):
  • Competition: CFTC under Chairman Selig prioritizes onshoring offshore markets (crypto, perpetuals, prediction markets) to ensure consumer protection and bring price discovery to the US.
  • Innovation: Regulatory body actively seeking to approve new products (perpetual futures, crypto) faster (180-day timeline) to foster US competitiveness.
  • Harmonization: Increased cooperation between CFTC and SEC expected to resolve jurisdictional overlaps (e.g., security-based swaps, prediction markets).
  • Cash Treasury Clearing: Mandatory central clearing for cash treasuries and repo expected to take full effect by end of the year, driving demand for integrated clearing solutions (FMX/LCH).
• Crypto & Tokenization:
  • Tokenization: Viewed as a post-trade efficiency driver (collateral mobility, 24/7 settlement) rather than a primary liquidity driver for trading; management expects tokenized treasuries to evolve over the next few years.
  • Regulation: Disappointment expressed regarding the failure to pass the "Clarity Act"; anticipation of new CFTC Advanced Notice of Proposed Rulemaking for crypto asset markets.

Strategic Initiatives:

• Cross-Margining (LCH Partnership):
  • Timeline: Full implementation of cross-margining between FMX futures and LCH swaps targeted for Q1 2026.
  • Benefit: Potential 50–80% margin reduction for clients holding correlated swaps and futures positions; currently, 70% of bank partners expected to be ready to provide margin benefits in Q1 2026.
  • Adoption: Pipeline of clients awaiting technology completion; 12 FCMs live with nearly 80% of cleared swap balances available to FMX.
• Protocol Innovation:
  • Counterparty Blocking/P-Club: Planning to adapt the successful "P-Club" (curated liquidity) protocol for the futures market, pending CFTC approval.
  • Basis Trading: Launching integrated cash-futures basis trading protocols to eliminate slippage and improve risk management.
• Equity Partnerships:
  • Expansion: No immediate plan for additional strategic equity stakes on the buy-side (e.g., BlackRock, T. Rowe); current consortium of 10 equity partners deemed sufficient to drive adoption.
  • Focus: Primary capital raise complete; no need for additional equity funding to build the platform.

Risks and Headwinds to Outlook:

• Technology & Connectivity: Growth is contingent on FCMs and banks completing API/algorithmic integration; delays in this area (currently a "bottleneck") could slow buy-side adoption.
• Regulatory Approval: Future expansion into new protocols (counterparty blocking in futures) and products (listed swaps, base metals) requires CFTC/SEC approval; current regulatory uncertainty creates a "mental block" for new product rollouts.
• Client Adoption Friction: Institutional clients (asset managers) face longer onboarding timelines (6–12 months) due to OMS integration requirements (e.g., Aladdin) compared to hedge funds.
• Margin Efficiency Competition: Competitors (CME) currently offer higher offset percentages (up to 90% in some SOFR cases) compared to FMX/LCH; FMX must match or exceed this to capture volume.
• Market Share Concentration: Heavy reliance on the "first 10% of clients" to create liquidity; failure to reach critical mass could stall the virtuous cycle.

Management Tone on the Future:

• Confidence: Highly confident in the "playbook" success; views the transition from cash to futures as a "rinse and repeat" scenario.
• Patience: Acknowledges the "slow, slow, slow then exponential" growth curve typical of electronic exchanges; explicitly states "we did not enter this market to be number two."
• Vision: Believes the current market structure is "stale" and that competition is essential for resiliency and innovation; views the current year (Year 3) as the inflection point for futures.
• Hedging: Management hedges revenue projections by targeting conservative 50% incremental margins rather than maximizing immediate upside.

Miscellaneous:

• Market Data Strategy: FMX plans to transition from purely execution-based revenue to a hybrid model with significant subscription-based market data revenue, leveraging its "one-stop-shop" suite of products (cash, futures, FX, repo).
• Operational Efficiency: FMX leverages BGC's existing infrastructure (trading desks, technology) to minimize marginal costs for new product rollouts (e.g., FX, Term Repo).
• Future Speakers: Prof. Geoffrey Hinton emphasized the need for AI to be developed with "altruistic" care (like a mother) rather than purely competitive intelligence, drawing a parallel to the need for competitive, client-centric financial exchanges.